Wall Street has shown signs of rebounding in the past couple of weeks, but consumers remain concerned about the economy’s health. Growing worries that tariffs will push the economy into a recession and high inflation have been denting consumer sentiment.
Consumer sentiment fell for the fifth straight month in May, hitting nearly rock bottom on these concerns. With the Federal Reserve unlikely to go for a rate cut in the coming days, markets could remain volatile for a longer period.
Given this situation, it would be wise to invest in safe-haven stocks such as utilities. In this regard, Atmos Energy Corporation ATO, DTE Energy Company DTE, Edison International EIX and MDU Resources Group, Inc. MDU are lucrative buys. Each of these stocks carries a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The stocks are also from the low-beta category (beta greater than 0 but less than 1). Hence, the recommended approach is to invest in low-beta stocks with a high dividend yield and a favorable Zacks Rank.
Consumer Sentiment Touches a New Low
The preliminary reading of the University of Michigan’s consumer sentiment index fell to 50.8 in May, a 2.7% month-over-month decline. May’s reading is also the second lowest in the survey’s 75-year history. The lowest reading was in June 2022, when inflation hit a 40-year high.
Consumer confidence has fallen nearly 30% since January. The outlook for 12-month inflation rose to 7.3% from 6.5% in May. The five-year inflation outlook jumped to 4.6% from 4.4% in May.
The Federal Reserve paused interest rate cuts in January after inflation showed signs of increasing. The central bank slashed rates by 100 basis points prior to that, as inflation fell sharply, following an aggressive monetary tightening stance adopted by the Fed. Inflation has lately shown signs of declining again, with the consumer price index increasing just 0.2% sequentially in April, and 2.3% from the year-ago levels, the lowest since February 2021.
Although inflation is on track to meet the Fed’s 2% target, the central bank has adopted a cautious stance and won’t go for a rate cut unless policymakers are confident that inflation is declining sharply. Market participants still believe that the Federal Reserve will go for at least two 25 basis point rate cuts this year but the first is unlikely to happen before September.
Tariff Worries Weigh on Consumer Sentiment
President Donald Trump announced sweeping tariffs on all trading partners of the United States last month, igniting fears of a global trade war that could push the economy into a recession. This resulted in a market bloodbath.
However, markets have since stabilized and have recently been on a rally after Trump temporarily paused tariffs on most countries. Last week, the Trump administration said that it has reached a trade truce with China, its biggest trading partner and temporarily halted tariffs for 90 days.
The President had earlier slapped 145% tariffs on Chinese imports, while Beijing imposed 125% duties on American goods in retaliation. Although the United States and China are working out a trade deal, the outcome is little known to consumers. They are unclear how the tariffs are finally going to shape up and how they will impact the economy. These have been denting consumer sentiment lately.
4 Low-Beta Utility Stocks With Upside
Atmos Energy Corporation
Atmos Energy Corporation, along with its subsidiaries, is engaged in the regulated natural gas distribution and storage business. ATO serves nearly 3.3 million customers in more than 1,400 communities across eight states from the Blue Ridge Mountains in the East to the Rocky Mountains in the West. Atmos Energyoperates more than 73,000 miles of transmission and distribution lines as well as 5,700 miles of interstate pipelines.
Atmos Energy has an expected earnings growth rate of 6% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.8% over the last 60 days. ATO presently carries a Zacks Rank #2. Atmos Energy has a beta of 0.74 and a current dividend yield of 2.18%.
DTE Energy Company
DTE Energy Companyi s a diversified energy company that develops and manages energy-related businesses and services nationwide. DTE’s two largest regulated subsidiaries are DTE Electric Company and DTE Gas Company.
DTE Energy has an expected earnings growth rate of 5.9% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the last 60 days. DTE currently has a Zacks Rank #2. DTE Energy has a beta of 0.47 and a current dividend yield of 3.15%.
Edison International
Edison International is the parent holding company of Southern California Edison (SCE) and Edison Energy.EIXis an investor-owned public utility, primarily engaged in the business of supplying electricity to an approximately 50,000 square-mile area of Southern California.
Edison International has an expected earnings growth rate of 22% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 2% over the last 60 days. EIX currently has a Zacks Rank #2. Edison International has a beta of 0.77 and a current dividend yield of 5.71%.
MDU Resources Group
MDU Resources Group, Inc. provides value-added natural resource products and related services that are essential for energy transportation and regulated energy delivery services to its customers.
MDU Resources has an expected earnings growth rate of 5.2% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.1% over the last 60 days. MDU currently carries a Zacks Rank #2. MDU Resources has a beta of 0.72 and a current dividend yield of 2.93%.
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